Building Passive and Residual Income through Real Estate Investment

Let’s talk about the American Dream. To me that means having the opportunity to build a

business, generate wealth, and create freedom of time. Life is too short to spend 40 years

in a cubicle for a peanuts pension. So how do we accomplish this? In this article,

we’ll talk about achieving it through Real Estate Investment and a few key factors to

consider in getting there. How do I get started? What is required in order to be successful?

What is your opportunity cost of time? How do you protect your investments? What factors

increase or decrease your passive and residual income? And What does your long term

payoff look like?

Taking the first step in Real Estate Investment is often the hardest part. It can be scary

because there is risk involved. Just remember that calculated risks lead to greater reward.

There are a number of ways to begin investing. First and foremost, do your research, and

find a Realtor who is well versed in Income Properties and who has a network of lenders

and vendors to refer you to. These Real Estate Professionals can point you to the right

place to secure the capital needed, or convert your own capital into an annuity you can use

toward your real property investments. The key words here are DO YOUR RESEARCH.

That takes me to our next topic… What is required of you in order to be successful? Education is required in a variety of facets. When you start to look at your investment strategy, consult your Real Estate professional. But above and beyond that, do your own investigating. Find yourself an area (geographic or property type, or both), and become an expert in your niche. Know your budget (by speaking with the aforementioned lending professionals), and your rehab and operating costs. Your resources are endless, you just have to find them and utilize them on a regular basis.

So, you’ve purchased your first property that you intend to hold, and rent out while it builds equity. Now what? Let’s talk about your “opportunity cost of time” - Mike Hambright, Flipnerd.com. Meaning, what is the best and most profitable and/or meaningful use of your time? Being a landlord can be overwhelming and requires a lot of your time and energy, not to mention involves liability in a big way. The highest and best use of your time will depend on your goals, whether it’s spending more time with your family because of your additional income, or building your portfolio so that you never have to work unless you choose to. Take vacations and enjoy your loved ones, but my recommendation for the new investor would be to hire Property Management, so that you can focus your extra time on finding the next great deal.

Our next 2 items can be covered under the umbrella topic of Property Management.

Your Real Estate assets can be jeopardized in a number of ways, but the most common are neglect and vacancy. A good Property Management company will asses your purchase, and send licensed, and insured professionals to get it rent ready. Once this is complete they will screen your applicants to make sure you have responsible quality renters throughout the duration of the lease. This is VERY important. Terrible tenants will have your property in shambles and your pockets empty in no time due to eviction. Additionally, good Property Management companies have 24/7 maintenance lines to deal with any large issues quickly and professionally. This is KEY, since deferred maintenance creates large expenses, and unhappy tenants create large vacancy rates. With the right management, you can avoid both of these the majority of the time.

So, what’s the coolest thing about buy and hold Real Estate? It creates long term passive/residual income, and builds equity for your future. Consider this: As you are holding these properties and cash flowing, they’re building your retirement for you. Population growth predictions around the US and in specific metro cities over the next 20-30 years are jaw dropping. The goal would be by this time to own your properties free and clear. In an ideal situation, you haven’t had to work for the last 10-15 years because of your cash flow, and you now are sitting on huge liquidation potential should you so choose, or a large estate for your predecessors.

Seems far fetched? Just remember that calculated risks lead to greater reward. A great team of professionals to help, education, protection, and being proactive can get you there.